Forex Price Action Trading

Average price movements is a way to alleviate the extremes and easier to monitor and predict future steps. There are many types, but they are usually present two: simple average price movement (Simple Moving Average – SMA) and the exponential average price movement (Exponential Moving Average – EMA). Simply moving average is the simplest form of monitoring of the average movement, but is extremely sensitive to sudden jumps or drops (spikes). Exponential moving average is more focused on current prices shows what traders are doing right now. They did last week or last month. Simply moving average is finer than exponential average movement. Average movement over long periods is’ ‘prettier’ than the average movement in shorter periods. Short moving averages quickly respond to price movements and can recognize trends at an early stage. However, due to the quick response, sensitive to sudden jumps and you can cheat. Finer moving averages slower correspond to changes in price, but will save you from false rebounds and exiting positions. However, because of the slow response, can you give late signal for entering the trade and thus cause you to miss some good opportunities. The best way to use the average price movement is to draw different types on the chart, so you can see the long-term and short-term average trends. The convergence/divergence moving average technical indicator developed by George Appeal, which is calculated by subtracting the 26-period exponential moving average of a particular security value of the 12-period exponential moving average of the same securities. By comparing moving averages, MACD shows the characteristics of monitoring trends and spotting differences (divergence) of the moving averages as an oscillator, MACD displays momentum characteristics trend. Probably the most used signal line is the one that is on the MACD screen. The signal line is the exponential moving average of the MACD line. The signal buy is generated when the MACD line crosses above the signal line, a signal of sell when the MACD line crosses below the signal line.

MACD (12, 26, 9)

Fast EMA 12

Slow EMA 26

MACD SMA 9

Its simplest meaning would be like moving average. Moving average is one of the most popular and most widely used tools for technical analysis. It represents the average price of currency in a specific period of time (usually 20, 30, 50, 100 and 200 days), which is used in order to correct. It shows the direction of movement of the currency – up or down. They can be used for keeping track of daily, weekly or monthly pattern. Every new day (week or month) numbers are added to the average and the oldest are discarded, so that the average “moves” over time. Generally, the shorter the time frame we use, it will be more volatile prices show. For example, line 10-day moving average will move up and down more than line 100-day MA. There are four different types of MA: “Simple” (or arithmetic), Exponential, Smoothed and Linear Weighted. Very often used and a double MA. Simply moving average is the simplest form of monitoring of the average movement, but is extremely sensitive to sudden jumps or drops so-called Spike. And now more.

Average price movements is an easy way to ease the operation of the price over time. When we say “average movement” means the average closing price of a currency pair for a number of past periods. MA 100 means the average cost of the closure of a currency pair over the last 100 time periods (minutes, hours, days, and weeks). Like any indicator, the average movement is used to help us predict future prices. Looking at the moving averages, you can make general predictions of where the price will be gone. As we have already said, moving averages mitigate price movements. There are different types of moving averages, and each one has its own level of “mitigation”. Generally, the moving average milder (higher number – for example, 50, 100, 200) slower reacting to price movements. ”Smaller” moving average (eg. 3, 5, 10) reacts more quickly to price movements. Moving Average (MA)/Moving Average – technical indicator showing an average of data for a number of time periods. It “moves” because for each calculation, we use data from X number of time periods. By definition, the moving average is late to market. An exponentially smoothed moving average (EMA) gives greater weight to more recent data, in an attempt to reduce the delay. Simple Average is moving average that gives equal weight to data on prices every day.

MA (50, 50)

PERIOD 50

SHIFT 50

Simple average price movement (SIMPLE MOVING AVERAGE – SMA)

Simple average of price movements (or abbreviated SMA) is the simplest type of average movement. Basically, SMA is calculated by adding the last number in the period from the closing prices and then dividing that number by period. Perhaps it is this vague but now we’ll explain everything.

If you choose SMA 5 on the graph of 1 hour, add the closing prices for the last 5 hours, and then divide that number by 5. In this way you get your SMA. If you choose SMA 5 to 30 minute chart, add the closing prices for the last 150 minutes (30 * 5), and then divide that number by 5. In the same way it determines at any given time. Most trading platforms will make all the calculations for you. The reason why we are the gait with computation is because it is extremely important that you understand how to calculate the average movement. If you understand how to calculate each average and then you can make a decision which type best for you. Just like other indicators, SMA works with delays. Because you are looking at the average price, you really only look “forecast” future prices, not a concrete future. Here are examples of how moving averages mitigate pricing activity.

SMA are at this chart shows the overall feeling in the market. Moving averages give us a broad overview so that we can make a general prediction of prices in the future. If the SMA great tool, is one big problem with it: SMA is very sensitive to sudden jumps (spikes). In another case, the better you will understand what I mean: The result of SMA would be much lower and you get the impression that the price goes down, when in reality the other day may perhaps be just a one-day event (eg. May reduce the interest rate).What we are saying is that sometimes SMA may be too simple! If only there was a way you can filter out these jumps so you do not get the wrong picture? There is also called exponential average price movement (EMA)! EMA gives more weight. It means they would jump on day 2 was less value and would not be affected so much to the moving averages. So, put more emphasis on what traders are doing now.

What traders are doing now, but what they did last week or last month. First let’s see what we wearing EMA. If you want an average of movement which will match the price movements rather quickly, then the EMA with a short period (eg. 3, 5, 8) the best choice for you. It can help to ”catch” the trend at an early stage, which will result in higher profits. In fact, as early as possible grasp the trend, the more you can ‘drive’ on it and that way you can make good money! The trap is that choppy you can get a false signal. Since moving average responds quickly to price, you might think a trend is forming, but in fact is only a blip returns to the starting position (spike). In SMA is inversely. If you want to average movement responds to ‘finer’ and slower responses to changes in price, then the SMA best choice for you. Though slow to react to changes in price, it will save you from many false entries in the trade. When the lower SMA may cause excessive delays, and may miss a trade. What is better? EMA or SMA? That decision is still yours, but I would be in favor of both combinations. Many traders use several different average movement in order to see both sides of the story. Mainly used a longer period SMA to find out movement ”main” trend, and then use the shorter period EMA to find a good time to open a position. In fact, many trading systems use it. It can be can used the average movement as part of their trading system. How to find the combination of SMA and EMA that best suit you, you must simply try different types and watch them at different time intervals. In time you will find out which are the best for you.